The influence of managerialism and neoliberalism has advocated a new model of governance, which blends several pro-market ideas (such as competition, consumer choice and corporate management) and practices related to privatization, marketization, deregulation and corporatization, etc. The trend so-called New Public Management (NPM) has been adopted by governments around the world since the last couple of decades and heavily impacted on the public sector (Hood 1991). 

As an example of the public sector, education in Europe is increasingly relying on market mechanisms in governance. Particularly in higher education (HE), it has been identified as a shift for deregulation and more private provision (de Boer, Enders, & Schimank, 2007; Jungblut & Vukasovic 2017; Olssen & Peters, 2005), and governing tools like performance management and accountability measures are introduced into the higher education sector (Middlehurst, 2004). After the hand of the market became more and more visible, Capano (2011) demonstrates the varying degrees of governance change in European HE. Studies show that the concept and principles of NPM have been implemented along various paths (Broucker & de Wit, 2015; Lepori & Jongbloed, 2018; Musselin & Teixeira, 2014).

From the perspective of historical institutionalism, the diversity of institutional change reflects path-dependency, through which trajectories of development are channeled and linked with previous and existing arrangements (Thelen, 1999). Taking that into account, each HE system is embedded in a specific local environment with the traditional values and institutional arrangements that are historically inherited. Scholars then have turned into local contexts for explanations to complete their account of transformation. They stress historical complexities in line with individual local contexts in, for instance, Italy (Capano, Regini, & Turri, 2017) and Portugal (Donina & Paleari, 2019).

HE policy has been perceived as a key indicator for national competitiveness in the globalizing world, the more qualified human resources developed by universities and colleges the higher advantage a country owns. Against the unavoidable global competition, many countries many governments have adopted the logic of market and applied pro-market policy strategies. In particular, policy instruments are important factors in the change of HE governance, which involves the adoption and implementation of the alternative policy initiatives and tools set for addressing globalization (e.g. NPM reforms). The choice of policy instruments, influenced by government preferences especially for the specific types of resources, is a strategic decisions made by the governments aiming to ensure their control over the policy agenda and the effective implementation of the decided steering instruments (Capano, 2015; Howlett, 2009).

Given that the NPM trend molds market governance with particular intention to address increased concerns about the growth of public expenditure (Gornitzka, Maassen, & de Boer, 2017), the paper focuses on the global influence of neoliberal ideology on the selection of policy instruments at the stage of policy formulation. Following the theories of policy instruments formulated by Hood & Margetts (2007), the study focuses on the policy instruments of teasure (e.g. competitive funding schemes), which policy-makers strategically deploy to increase institutions’ performance or attain given policy goals. Specific attention is drawn to how the rising global patterns of market governance have engendered the policy design of public financial support for universities in the local educational sector.

The NPM ideology may have initiated in Western countries, but has also been flourished in Asia. Shin (2018) ascertains that Asian HE systems that follow the NPM and neoliberal orientation deploy governance differently and usually in a rather active and aggressive approach comparing to their counterparts in Europe. In particular, those Asian countries, as follows of modernization, have integrated their traditional culture with Western values, and the volume and quality of their HE systems have been developed in a remarkably high-speed and booming way (Yang, 2019). The paper is intended to study Asian countries, as latecomers in HE development. They eager to catch up with developed countries and have been bombarded not only with questions that most western HE systems already resolved but also competitive pressure special in globalization. In order to tackle those tasks simultaneously, governments in the region have endeavored to embrace new strategies and measures. NPM approach and neoliberal policy instruments are thus tactically applied. More specifically, governmental exercises of public funding that are channeled into HE institutions in Hong Kong and Taiwan are analyzed as case studies and compared from the perspectives of historical institutionalism. Hong Kong had been a British colony for over 150 years since the 19th century. After a political transition in 1997, the city-state became a special administrative region of the People’s Republic of China. Much of Hong Kong culture and social systems have been nurtured in a mix of ex-British colonial and Chinese heritage (Cheng, Cheung, & Ng, 2016). In contrast, Taiwan had been a Japanese colony for 54 years since 1895. Founded in 1928, the National Taiwan University is the first university in the island country, serving as producing a Japanese ruling Taiwanese elite and extending the power of Japanese Empire to Southeast Asia (Morris et al 2002). After World War II, the Chinese Nationalist Party retreated from mainland China to Taiwan and the island has been influenced by underlying Confucian heritage ever since (Hsieh, 2020). Taiwan and HK were both colonies yet under different colonialist influences: the former of Japanese and the latter British culture respectively. The cases this paper examines are both drawn from specific empirical setting, namely hybrid governance in policymaking processes since 2000. Based on comparative analysis of official documents between two cases, the case study explores how global NPM impacts on the local selection of policy instruments for HE funding mechanisms.

Governance is considerably dependent on the governing structures and policy strategies, both of which evolve against the dynamics in HE and if more specifically its own inherited political culture. The paper studies the global NPM influence on the selection of financial policy instruments in domestic HE governance, in which the hybridization of mixed historical and cultural contexts have played significant roles. The study found that although both governments rely heavily on performance evaluation conducted either by government, contracted agencies or quality-control mechanism, both regions have employed market-based policy instruments in diverse approaches. More significantly, those financial instruments would present different features and limitations when being implemented in Hong Kong and Taiwan, despite both of which have been highly influenced by Confucianism. The paper argues that the heterogeneity of HE systems should not to be neglected and the hybrid governance usually resulted in systemic differences in the selection of policy instruments in the HE sector.

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